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Home » Industry News » Maritime & Ports & Harbour Services » Don’t be tempted to skimp on cargo insurance

Don’t be tempted to skimp on cargo insurance

ECONOMIC slowdown and slow recovery in the midst of the pandemic are major challenges facing the transport and logistics industry, and this coupled with trade tensions and political upheaval are exacerbating the supply chain risks.

In such an environment, the freight forwarding sector is under tremendous pressure in terms of costs and achieving operational efficiencies, while also having to balance the risks faced in safeguarding valuable and high-risk cargos through marine insurance solutions.

Elesh Bisla, CEO of GENRIC Marine Underwriting Managers says that while marine insurance products are conventional in nature, each policy must be customised to meet the unique needs and risk exposures of every client, every cargo, and every operating environment – from simple and straightforward, through to complex and high-value. Here, the roles of experienced marine insurance brokers and underwriters are crucial.

“In an increasingly litigious environment, as well as escalating crime and weather catastrophes, it is crucial that all role players in the supply chain fully understand the nature of freight being transported, its value including all duties and taxes, the transportation risks whether by sea, air, rail or road, who is liable, and what exactly is covered at every point of the supply chain journey.  The brokers, underwriters, adjusters, surveyors, and claims handlers play a crucial role in this supply chain, and their skills and experience are increasingly in demand,” explains Elesh.

Escalating overhead costs and skimping on insurance

“Freight forwarding and cargo handling is a highly-competitive industry and price plays a big role. With escalating costs from fuel to taxes, duties, and security, there is always the temptation to cut costs and corners, including on the insurance side – often with disastrous consequences if and when things do go wrong.  We’re seeing an increasing trend of freight operators taking the bare minimum of cover, exposing themselves to massive liabilities both in terms of their balance sheet and reputation. In some instances, freight forwarders are so eager to sign up new business that they do not fully interrogate the real value, risks, and liability associated with the cargo they are taking on.

“Consider the implications of a logistics company that only has R500 000 damaged goods cover, but the cargo load being transported is worth R4 million. If that vehicle is involved in an accident and the load is an outright loss, the implications of a R3.5 million shortfall in cover could put the forwarder out of business permanently, and liable for the damages.

Escalating crime

“Escalating crime and syndicates pose another significant risk, with high-risk cargoes such as electronics, cell phones, sim cards, alcohol, and cigarettes falling prey to hijackers and looters.

Training of transport operators

“Freight handling and loading is another important risk that requires training to ensure that drivers and transport operators know how to load and offload cargo correctly, as well as the correct storage and handling conditions of such goods – for example perishables and flammable items. In such instances, it’s important to understand whether your insurance coverage applies once cargo is offloaded and ownership or possession is transferred to another party.

The necessity of an experienced marine insurance underwriter and broker

“Ultimately, it is the marine insurance broker who will assess the risks faced by their client, prepare the broking notes in accordance with the client’s needs, ensure compliance with the sector rules and regulations, negotiate, and place the risk with an insurer. It is crucial that the underwriter receives the correct information in the broking notes to correctly assess the risk and provide an informed and correct scope of coverage, limits, conditions, and premiums necessary to ensure that in a worst-case scenario, their client can get back up and trade as normal, safeguarding their bottom line and reputation” concludes Elesh.

 

  • GENRIC Marine Underwriting Managers is an Authorised Juristic Representative of GENRIC Insurance Company Limited, an Authorised Financial Services Provider (FSP No: 43638) and licensed non-life Insurer.
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